24 April 2019 : Over the last decade, STANBIC has evolved from a Merchant Bank into a holding company that provides end-to-end financial solutions across the broad spectrum of financial services. In its FY’18 results, STANBIC recorded growth in gross earnings and PAT of 5% to N222.4 billion and 54% to N74.4 billion respectively due to contributions from of non-core banking activity. Standalone, core banking (PPB) booked FY’18 PAT of N581 million from a N16.5 billion loss in FY’17. That said, the segment recorded significant improvements in deposit growth (up 15% y/y to N501.7 billion) and loans and advances (up 10% y/y to N179.8 billion), while key ratios like cost-income and NPLs improved from 99.0% and 13.6% respectively in FY’17 to 97.0% and 9.0% in FY’18.

Improving funding cost to cap margin contraction: The scorecards from STANBICs two other key divisions - Corporate & Investment Banking and Wealth were far more appealing with double digit y/y growth of 12% and 18% in PAT to N51.2 billion and N22.6 billion respectively. While the improvement in CIB y/y was largely due to a write back of N3.5 billion (FY’17 N10.6 billion charge), the Wealth division was supported by a 6% rise the number of retired savings accounts (RSAs) under management to 1.7 million accounts as at FY’18 that spurred a 19% y/y in AuM to N3.2 trillion from N2.7 trillion in FY’17.

Earnings Outlook: STANBIC has given guidance for loan growth (16%), NPL ratio (3.9%) and AuM growth (19%) for FY’19 and analysts view these targets as aggressive. That said, analysts have modelled loan growth of 6.8%, NPL of 4% and a FY’19 EPS of N7.48 (FY’18 N7.27). STANBIC is currently trading at 2.0x book value representing a 158.5% premium to the sector average of 0.7x and analyst's 12-month price target of N49.31 portends an 6.7% upside to current market price N46.20. Analyst's recommendation is HOLD